1998 (11) TMI 87 - HC - Income Tax

Trust registration under s12A and 'religious community' benefit dispute; rejection quashed, remanded for fact-based review.

The dominant issue was whether registration under s 12A could be denied on the premise that the trust benefited a 'religious community' attracting s ... Denial of the registration u/s 13(1)(b) - Public charitable trust - benefit of the 'Brahmakshatriya community' religious community Or Not - HELD THAT:- Merely because accumulation of a group of persons are identifiable by one common name and ordinarily be pursuing a common religion or religious faith will not make it a religious community. Nor is there any presumption that any class of persons, who on account of any historical or geographical reason are identifiable as a community becomes a religious community. Whenever an application is made for registration under section 12A, it is for the Commissioner to make an enquiry and reach his conclusion about the nature of the community. He cannot reject an application simpliciter on abstract doctrine of burden of proof to be on the applicant by presuming the same to be a religious community unless otherwise proved. In order to reach a conclusion whether a community is a religious community, there must be something to show that the community denotes abiding by a particular faith to be considered as a member of that community or its identification is on account of practising or following customs or practices. Merely by adhering to distinct cultural practices in its social interactions may not be sufficient to treat a community a religious community. The question also requires to be considered whether a caste in order to be excluded from the benefit of registration be also a religious caste or a part of a religious community as an identifiable mark. Without any such material, it is not possible to reach a concrete conclusion. While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not. If a collective organisation is for other purposes, the fact that many of such community follow a common faith will not be a ground to hold it as a religious community. In other words, formation of community must have nexus with following a common faith. In this context, the Commissioner must first consider whether the name 'Brahmakshatriya' by itself denotes any religion or origin of community has been founded on adherence to any religious faith. The order communicated vide annexure-G, is, therefore, quashed and the respondent-Commissioner is directed to decide the application of the petitioner for registration u/s 12A of the Income-tax Act within a period of eight weeks from today after affording an opportunity of personal hearing to the petitioner for which a date may be fixed Issues Involved: Challenge to rejection of registration as a public charitable trust under section 13(1)(b) of the Income-tax Act based on the classification of the 'Brahmakshatriya community' as a religious community.Summary:The petitioner contested the rejection of their trust's registration application, arguing that the Brahmakshatriya community is not a religious community as per section 13(1)(b) of the Income-tax Act. The petitioner highlighted that the community's formation is not based on religious grounds and its members do not adhere to any specific religion. The lack of reasons provided in the rejection order to classify the community as religious was emphasized.The court acknowledged the absence of concrete reasoning in the rejection order to support the classification of the Brahmakshatriya community as religious. It was emphasized that the Commissioner must conduct a thorough inquiry to determine if a community qualifies as a religious community, considering factors beyond mere cultural practices. The distinction between registration requirements and tax benefits under section 12A was clarified, stating that registration is not a prerequisite for tax benefits, but the Assessing Officer must verify compliance with section 13 conditions.Furthermore, the judgment highlighted that the nature of a community as religious should be based on its collective purpose rather than individual beliefs. The court directed the Commissioner to reevaluate the registration application within eight weeks, ensuring a fair hearing for the petitioner. The initial rejection order was deemed unsustainable due to its lack of reasoning, and the court ruled in favor of the petitioner, quashing the original decision.